Debt to Commercial Banks: The London Club

Abstract

The London Club is the multilateral forum for rescheduling loans from commercial banks. It is so called because it sometimes meets in London, but it may meet anywhere which suits the debtor and a representative steering committee of commercial banks. At the end of 1989, London Club debt was 14 per cent of Sub-Saharan debt (US$24bn), but in 1989, the Club received 19 per cent of debt service (US$2.6bn), because their loans had harsher terms. Bank loans were concentrated in a few nations, notably Nigeria and Côte d’Ivoire, which together owed more than US$13bn: but only for Côte d’Ivoire was bank debt the largest element of total debt. However, all nations relied on banks to provide short-term credit for imports through letters of credit (LCs): though these were usually discussed outside the London Club (see Chapter 6, section 6.1), Club talks affected the amounts and cost of LCs, and thereby each nation’s import financing.